2022 (6) TMI 1520 - AT - Income Tax

Disallowance u/s.36(1)(va) - late deposit of the Employees share of EPF and ESI etc. - HELD THAT - It is an admitted position that the assessee did deduct employees share of EPF and ESI and paid the same after the due date under the respective legislations but before the time stipulated for filing return u/s 139(1). In our opinion, this issue is no more res integra in view of several judgments allowing deduction u/s 36(1)(va) of employees share of contribution deposited after due date under the respective Acts but before the date prescribed u/s 139 of the Act. As decided in Nipso Polyfabriks Ltd. 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT there exists no difference between employees or employer s contribution and both are to be allowed as deduction if deposited before the due date. Effect of amendment to Explanation 2 below section 36(1)(va) providing that the provisions of section 43B shall not apply for the purpose of determining the due date under this clause w.e.f. 01.04.2021 - The Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly apply in relation to assessment year 2021- 2022 and subsequent assessment years. Since the assessment year under consideration is 2019-20, which is anterior to the amendment carried out with effect from A.Y. 2021-22, we hold that the position of law as set out by various Hon ble High Courts including the one in CIT vs. Nipso Polyfabriks Ltd 2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT squarely applies , thereby not warranting any disallowance since the amount in question was admittedly deposited before due date u/s 139(1) of the Act. The addition is therefore, directed to be deleted. Assessee appeal allowed.

Summary

The appellate tribunal ITAT Pune, consisting of Vice President Shri R.S. Syal and Judicial Member Shri S.S. Viswanethra Ravi, addressed an appeal by the assessee against the NFAC's order dated 22-07-2021 concerning the assessment year 2019-20. The appeal was initially time-barred by one day due to the Covid-19 pandemic, but the delay was condoned based on the Supreme Court's judgments in Cognizance for Extension of Limitation.

The central issue was the disallowance of Rs.10,54,797/- by the Assessing Officer under section 36(1)(va) of the Income-tax Act, 1961, for late deposit of employees' share of EPF and ESI. The tribunal noted that the assessee deposited these contributions after the due date under the respective legislations but before the filing deadline under section 139(1) of the Act. Citing the Himachal Pradesh High Court's decision in CIT vs. Nipso Polyfabriks Ltd., which allows such deductions if deposited before the due date under section 139, the tribunal found the disallowance unwarranted.

The tribunal also acknowledged the Finance Act, 2021 amendment, which specifies that section 43B does not apply for determining the due date under section 36(1)(va) effective from 01.04.2021. However, since the relevant assessment year was 2019-20, prior to the amendment's effect, the tribunal ruled in favor of the assessee, directing the deletion of the disallowance. The appeal was thus allowed, with the order pronounced on 22nd June 2022.